2022 (5) TMI 1523 - AT - Income Tax

TP adjustment - reimbursement of expenses - item titled as “Reimbursement of Expenses paid Share based payments cross charged” - item titled as “Reimbursement of Expenses paid Share based payments cross charged” - HELD THAT:- We are of the view that this reimbursement forms integral part of cost of services provided by the assessee and accordingly, it cannot be treated as separate international transaction. In our considered view, the assessee has rightly aggregated the same with the cost of services. A.R also submitted that the TPO himself has aggregated this expenditure as part of cost of services in the succeeding year.

TPO was not correct in treating this reimbursement as separate international transaction and determining its ALP as NIL - we direct the AO/TPO to delete the transfer pricing adjustment made in respect of this reimbursement. It should be aggregated with the cost of providing software development services/ ITE services and the ALP determined for these transactions after including this expenditure under TNM method would meet the requirements of law.

Disallowance of vehicle lease rental expenses - As per AO assessee has actually purchased the vehicles and the lease rent payments have been made towards the cost of purchases of vehicles - above said amount consisted of repayment of principal portion and repayment of interest amount - HELD THAT:- We notice that it is an recurring issue and identical disallowance made in the assessee’s own case relating to AY 2010-11 [2017 (1) TMI 1673 - ITAT BANGALORE] has been deleted following the decision rendered by Hon’ble Supreme Court in the case of ICDS Ltd [2013 (1) TMI 344 - SUPREME COURT] wherein it was held that the lessor shall be entitled to depreciation on assets leased out by him. Consequently, the lease rental payments made by the lessee is allowable as expenditure in his hands. In the instant case, the assessee herein is the lessee and hence the lease rental payments are allowable as expenditure. Decided in favour of assessee.

Deduction claimed u/s 10A - AO computed revised export turnover reducing some expenses from Export turnover - DRP directed the AO to reduce the above said expenses from total turnover also - plea of Ld A.R was that the AO should have allowed the deduction as per the direction given by Ld DRP - HELD THAT:- Deduction was allowed as claimed by the assessee. Section 10A is a beneficial provision and the said deduction has to be computed in accordance with the provisions of sec.10A of the Act. The mistake, if any, made by the assessee in computing the quantum of deduction, in our view, cannot be a ground to reduce the amount of deduction. What is allowable as per law should have been allowed by the AO. Accordingly, we direct the AO to allow deduction u/s 10A of the Act as per law, irrespective of the quantum of deduction claimed by the assessee.

Liability to deduct tax at source from year-end provisions - TDS u/s 194C - disallowance of sub-contracting expenses - Disallowance u/s 40(a)(ia) - A.R submitted that the assessee should be allowed deduction in the subsequent year, when the TDS was deducted - HELD THAT:- We notice that this bench of Tribunal has analysed the issue relating to liability to deduct tax at source from year-end provisions in the case of Biocon Ltd. [2022 (4) TMI 795 - ITAT BANGALORE] wherein the Tribunal has analysed the TDS liability under different situation and rendered its decision on each of the situation. Different kinds of situations are warranted, since the year-end provisions are made on estimated basis and most of the times it is so made without receipt of invoices from the goods supplier/service provider. Accordingly, we are of the view that this issue requires fresh examination at the end of AO.